Logica shares lose 14% after disappointing results

On a day of big fallers, the biggest in the top 350 is IT services group Logica.

As Inmarsat found out on Thursday this is no time to disappoint the market with your results, and unfortunately for Logica that is exactly what has happened. Its shares have dropped 14.3p to 88.6p, a near 14% decline, after the group reported a 5% rise in half year revenues but a 10% fall in operating profit to £113m after £20m of restructuring charges.

It pointed to a challenging market leading to a loss in the Benelux area, and said margin improvement for the year would depend on an improvement there. Graeme Clark at Jefferies said:

The first half results fell short of expectations despite reporting stronger than expected revenue growth. Margins in both Benelux and the UK fell short of expectations, with a number of factors having a worrying impact in the former. While 2011 revenue guidance was ahead of expectations, the weaker margin outlook is likely to disappoint, particularly in light of more positive statements from peers.

George O'Connor at Panmure Gordon kept his buy recommendation but lowered his target price from 179p to 162p, but Julian Yates at Investec issued a sell note:

The first half results were a surprise in that they are worse than what we assumed in our cautious stance. The results highlight material weakness in the numbers and outlook. Stripping out the pension gain, earnings before interest, tax and depreciation were 7% below our forecasts and the revised 2011 outlook of profits ahead of 2010 (versus previous margin improvement stance) looks very fragile (Benelux loss making, poor Sweden margins, UK impacted by restructuring, outsourcing margins declining yoy). We expect to lower our (below consensus) forecast by around10%.